How to Protect Your Brand From Web Privacy Lawsuits

Many retailers assume that complying with the latest privacy laws or using trusted platforms is enough to stay protected, and that privacy lawsuits are mainly a risk for large national brands.

Yet nearly half (43 percent) of recent web privacy claims have targeted businesses in the consumer discretionary sector, with retailers accounting for a significant share. Smaller clothing and specialty stores are among the most frequently targeted.

A growing number of these claims stem from older laws, like the 1967 California Invasion of Privacy Act (CIPA), originally designed to prevent wiretapping. Plaintiff’s law firms proactively scan retailer websites for privacy gaps, like outdated privacy policies, and use those laws to argue that companies’ usage of analytics platforms, chatbots, and other digital tools is the legal equivalent of intercepting private conversations.

As retailers adopt more marketing and engagement technologies, privacy controls often lag behind, leaving even well-intentioned brands at risk for costly legal action.

What’s Driving Retail’s Privacy Vulnerability?

Nearly 60 percent of claims target businesses with less than $100 million in revenue, and most lawsuits rely on older statutes that demand more detailed, transparent disclosures than many retailers realize.

In practice, many retailers’ privacy policies fail to list all the tools and data partners that are collecting customer data on their sites. And while 73 percent of websites with very high traffic updated their policy annually, that rate falls below 40 percent for lower-traffic sites.

Furthermore, only 19 percent of retail websites use consent banners, and even among the most highly trafficked sites, adoption peaks at 61 percent. Where banners do exist, they’re often too broad or generic, rarely informing users about what data is being collected or why.

3 Ways Retailers Can Reduce the Risk of Web Privacy Litigation

To better protect your brand from today’s privacy risks, start with these three steps:

1. Audit and reduce trackers.

Evaluate every analytics tool, pixel, chatbot and plugin supporting your website. For each, ask whether it truly drives business value or just adds legal risk.

Some privacy risk is unavoidable in order to deliver a user-friendly, data-driven experience, but every unnecessary tracker increases litigation exposure. For example, if you’re no longer running TikTok ads, removing the TikTok pixel is an easy way to cut risk without impacting your business.

2. Provide specific, in-context disclosures.

Instead of burying disclosures in your privacy policy, use just-in-time disclosures that explain data collection and sharing practices at the moment users interact with certain features. For example, when a customer starts a chatbot conversation, display a clear notice that the chat is being recorded and may be shared with third parties.

Additionally, in both your on-site disclosures and privacy policy, move beyond generic cookie-collection language by clearly naming each tracking technology, who receives the data, and why it’s needed.

3. Keep your privacy policy accurate and updated.

Review and update your privacy policy annually, as well as whenever you add or remove technologies. Clearly list all tracking tools and vendors, describe what data they collect, and explain how and why that data is used or shared. Include opt-out options where possible, and always display the last updated date to ensure transparency and to meet regulatory expectations.

Make Privacy a Living Part of Your Retail Strategy

There’s no one-size-fits-all approach to managing privacy risks, especially as the privacy risk landscape varies widely by sector and constantly changes. Weigh the marketing value and operational benefits of data collection tools against the evolving legal landscape.

Even as privacy litigation changes, the fundamentals remain the same: know what data you collect, be transparent with customers, and treat privacy as an ongoing part of your company’s operations. That’s how you turn privacy from a liability into an advantage.

Daniel Woods is principal researcher at Coalition, a company that combines comprehensive cyber insurance coverage and security services to help businesses prevent digital risk before it strikes.